US inflation data will be ‘messy’ – 5 things to know about Bitcoin this week

Bitcoin (BTC) is starting another week in a dangerous position around $20,000 ahead of new macro turmoil.

Admittedly, after capping off its best weekly gains since March, the biggest cryptocurrency is struggling to maintain its recently regained levels.

With major resilience zones overhead and inflation data to be released later in the week, the coming days could be frustrating for risk assets everywhere.

At the same time, the crypto market sentiment is showing signs of recovery, and on-chain metrics continue to underscore what Bitcoin’s latest macro price bottom should be.

With conflicting data everywhere, Cointelegraph is taking a closer look at potential market drivers for the week ahead.

200-week moving average causes headaches

The June 10 weekly close at around $20,850 was nothing special for BTC/USD, but the pair still managed its best seven-day growth in a few months.

Bitcoin, which ended Sunday exactly $1,600 higher than its position at the start of the week, thus made a progress not seen since March.

However, the success did not last long as the hours following the weekly close turned negative. According to data from Cointelegraph Markets Pro and TradingView, BTC/USD was targeting $20,400 at the time of writing.

BTC/USD 1-hour candlestick chart (Bitstamp). Source: TradingView

Bitcoin’s ability to hold current levels could be key in setting the mood this summer, as the relief in global equities will provide an opportunity to erase some of the crypto’s losses in recent months.

That’s why commentators, including the trading package Decentrader, watched the weekly chart with interest.

Others were less enthusiastic, noting that BTC/USD made another close below the key 200-week moving average (WMA) around $22,500.

In previous bear markets, the 200 WMA acted as an overall support level and Bitcoin briefly settled into macro bottoms below. This time, however, it looks different, as $22,500 is missing on the chart for one month.

Meanwhile, popular trader TechDev defended a more optimistic outlook for the rest of 2022.

Over the weekend, he argued, by the end of the year, the rollback of more substantial WMAs should end Bitcoin’s “re-accumulation phase” altogether.

TechDev, “BTC knocking 32-35K confirms possibly end of re-accumulation and + correction this year.” said Twitter followers

“It is most likely to occur imo when both the 100W and 50W EMAs are in this range. Currently 100W at 34.8K and 50W at 37.2K.”

Elsewhere, the ongoing asset liquidation from embattled crypto lending platform Celsius has increased selling pressure.

Brutal dollar bounces back as Asian markets plummet

Asian stocks were down on July 11 as the start of the macro week was marred by news of social unrest in China.

Markets felt the pressure as protesters demanded the release of frozen funds amid a scandal involving both banking officials and local officials accused of misusing COVID-19 monitoring apps.

At the time of writing, the Shanghai Composite Index was down 1.5%, while Hong Kong’s Hang Seng was 3.1% lower.

While Europe did slightly better with modest growth for the FTSE 100 and Germany’s DAX, the United States continued to open up.

However, before Wall Street bounced back, the US dollar index (DXY) had already taken new strides, canceling a pullback that put a colder end to last week.

DXY was at 107.4 on July 11, just 0.4 points behind two-year highs seen days ago.

An analyst at trading firm The Rock, which analyzed the situation, described DXY as “extreme as can be” in terms of year-to-date growth.

“Based on the extreme rally so far this year, DXY is now up 16% year over year,” he said. Wrote:

“This is as extreme as we have historically spoken of, and unfortunately, it typically coincides with major financial stress in the markets, a recession, or both.”

Bitcoin managed to beat its traditional inverse correlation with DXY last week and rose with the index.

US dollar index (DXY) 1-day candlestick chart. Source: TradingView

Inflation will provide ‘messy week’

If that’s not enough, the age-old theme of inflation is fit to further test the market’s resilience this week.

The June US Consumer Price Index (CPI) reading will take place on July 13 and expectations are for the monthly figure to be even higher year over year.

The higher the inflation and the further it deviates from already high expectations, the more risk assets tend to react in anticipation of a response from policymakers.

For macro analyst Alex Krueger, the likely trajectory of this week is therefore clear.

“It will be messy,” he summed up on Twitter.

While the CPI stripped out many of the leading inflation indicators, it caught even mainstream commentators’ attention over the weekend with a stark implication that this week’s numbers could put the cat among the pigeons.

“Some will be quick to point out that this measure is retroactive, as next week’s US CPI inflation could get very close to 9%,” said economist Mohamed El-Erian. Reacted:

“Yes…but it captures the pain felt by many, especially the less fortunate sections of society; and affects inflation expectations.”

Meanwhile, any immediate reaction could definitively scare the Bitcoin markets in line with other risk assets, or at least lead to massive volatility as seen in previous CPI events.

MACD continues price dips

With multiple Bitcoin price metrics flashing “bottoms” or even hitting all-time lows, the signals that a BTC investment at current prices have historically unrivaled risk/reward are not scanty.

The latest metric to join the pack this week is the moving average convergence/divergence (MACD) on the weekly chart.

MACD actively tracks a chart trend that is currently playing. It involves subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.

When the resulting value is below zero, Bitcoin tends to be in a bottoming scenario, so the recent trip to $17,600 could be too if historical norms repeat.

Meanwhile, commentator Matthew Hyland registered a similar MACD structure is still playing on the 3-day chart.

Market analyst Kevin Svenson, “The 3-Day MACD is still in a bullish trend” Additional:

“Despite the pullback, I remain bullish here in the medium term.”

As Cointelegraph recently reported, Bitcoin’s relative strength index (RSI) is already at the most “oversold” levels in history.

Last week, by the way, a trader July 15 is called the key date when another chart feature will call the bottom, it consists of two separate MAs.

2-month highs for Crypto Fear and Greed Index

As a modest silver lining, the average crypto investor is slowly regaining his confidence, according to recent data.

Related: Top 5 cryptocurrencies to watch this week: BTC, UNI, ICP, AAVE, QNT

Building on previous strength, crypto market sentiment hit its highest levels since early May over the weekend and is now at 22/100.

While still in the “extreme fear” territory, the renaissance of the Crypto Fear and Greed Index is in stark contrast to the events of the past two months, where it has dropped as low as 8/100 below even some previous bear market lows.

Crypto Fear and Greed Index (screenshot). Source: Alternatif.me

The views and opinions expressed here are those of the author alone and may not necessarily reflect those of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.